Can cutting VAT help save our pubs and restaurants?

With the hospitality sector battling rising costs, tax hikes and wage increases, a group of leading chefs is calling on the Government to halve VAT for restaurants and pubs. We asked two respected local hospitality entrepreneurs for their views…

It’s no secret the UK hospitality sector is facing mounting financial pressures which is why four of Britain’s best-known chefs and restaurateurs have joined forces to launch the VAT’s The Problem campaign.

Founded by Tom Kerridge, Yotam Ottolenghi, Ravneet Gill and Simon Rogan, the campaign is urging the Government to reduce VAT on restaurants, pubs and cafés from 20% to 10%, bringing the UK more in line with many European countries.

The chefs argue that hospitality is facing one of the toughest trading environments in its history.

“We’re not making any money whatsoever and we’re just keeping our heads above water,” Simon Rogan recently told BBC Newsnight, while Tom Kerridge said the Government was getting business taxation “very, very wrong”. Yotam Ottolenghi described the current situation as “crippling”, adding: “Every pound that we take, a substantial amount of it just goes to the Government through different taxation.”

According to UKHospitality, Britain’s 20% VAT rate is the second highest in Europe, behind only Denmark. Countries including Germany (7%), Ireland (9%), France (10%), Italy (10%) and Spain (10%) all apply significantly lower rates to hospitality.

The chefs support recent increases to the National Living Wage but believe reducing VAT would allow businesses to survive, invest and continue employing people.

We asked two local hospitality entrepreneurs for their thoughts.

Brian Whiting, owner of Whiting & Hammond Pubs, believes the industry is at a crossroads.

“Once upon a time, every village had a butcher, baker and post office,” he says. “Sadly we’ve lost many of those, and now we’re in real danger of losing the Great British pub.”

Brian, whose group includes popular venues such as The Little Brown Jug in Chiddingstone, says pubs remain at the heart of local communities.

“We need everyone’s support to save this institution. For many people, the local pub gave them their first job. Once they’re gone, they won’t come back.”

Alex Boyd, patron chef at Kumquat on The Pantiles, agrees the industry needs support but believes VAT is only part of a much bigger picture.

“In my mind, VAT isn’t the only problem hospitality is facing,” he explains. “Costs are rising at an alarming rate.”

He cites one example from his own kitchen.

“We use mango purée in one of our desserts. Overnight the price increased from £7.85 to £9.69 per kilo – a 25% rise that I simply can’t pass on to customers.”

Labour costs have also increased significantly.

“Over the past three years, my staffing costs have risen by 26%, despite employing 32% fewer staff than we did three years ago.”

Alex believes the campaign is about survival rather than increasing profits.

“The VAT’s The Problem campaign isn’t about helping restaurants make more money. It’s about helping the industry survive.”

However, he also recognises the wider economic challenge facing Government.

“The hospitality industry contributes around £8.45 billion in VAT. If that rate is halved, the Government has to replace that revenue somewhere else, and that could lead to further financial pressures elsewhere.”

Instead, Alex believes the focus should be on stimulating economic growth.

“The Government needs to do whatever it can to encourage spending, reduce energy costs, support British farmers and help businesses rather than punish them. I understand the country has debt to repay, but if the economy isn’t growing, that debt only becomes heavier.”

Ultimately, he believes consumer confidence is just as important.

“Of course I’d welcome paying less tax, but I’d rather people felt confident enough to go out, enjoy themselves and spend money without worrying about their own finances.”